The Effect of Consumer Price Knowledge and Gender on Retail Marketing Strategy

1. INTRODUCTION

It has long been said that that consumer price knowledge and gender has an effect on retail marketing strategy. Consumer price knowledge and expertise of an industries prices, products and store location add to the ease at which consumers are able to cherry pick. They are infor- med of discounted prices on products as well as the pro- duct assortment of a particular store, through marketing and promotions. Price knowledge means the ability of buyers to keep prices in mind. Commodity prices in the market play a relevant role in consumer decision-making as they influence what, when, where and how much con- sumers buy (Alba et al., 1999). It is of utmost importance that retailers incorporate strategies that target and meet the needs of this type of consumer, as it will ensure a larger market share and in turn a greater ROI. The study aims to establish the effect of consumer price knowledge

and gender on retail marketing strategy. The study also aims to establish whether consumer price knowledge and gender has a positive effect on cherry picking in selecting groceries and whether there is a relationship between consumer knowledge and gender. Retail marketing strategy serve as the fundamental un- derpinning of marketing plans designed to reach market- ing objectives. A good retail marketing strategy should in- tegrate an organization's marketing goals, policies, and action sequences (tactics) into a cohesive whole. The objective of a marketing strategy is to provide a founda- tion from which a tactical plan is developed. This allows the organization to carry out its mission effectively and efficiently. Cherry picking can be described as taking the best and leaving the rest according to Fox and Hoch (2003). Cherry picking is used to portray both buyer and seller. Various sellers can be viewed as those who are selective about which consumer profile they choose to target, whereas consumers are selective about which products or services they purchase. due largely to a lack of smooth maintenance activities in the plant, which is brought about by the unavailability of replacement of parts, which should have been provided by the materials management department.

Available online at www.ignited.in Page 2

The function of the materials management department is very important especially in view of the difficulties associated with the purchase of equipment spares, which in most cases are foreign-sourced. Frequently, the materials management department has been accused for the frequent breakdown and shut downs as a result of its inability to provide the necessary spares as at when they are need. Consumers who are branded as cherry pickers are price sensitive shoppers who tend to delay purchases or move from one shop to another looking for a better deal with regards to price, product variety and assortment. Levy and Weitz (2004) define cherry picking as”… consu- mers who visit a store and only buy merchandise sold at big discounts”. Other factors that influence a consumer to cherry pick are store location, and store preference and consumer expertise/knowledge. REASON FOR THE STUDY There has been numerous studies conducted on the effect of cherry picking on consumer price knowledge and gender in selecting groceries in the USA and Europe but very limited research has been conducted on these two constructs in a South African context. OBJECTIVES OF THE STUDY The study aims to establish the relationship between con- sumer knowledge and gender in selecting grocery items. The study also aims to establish whether consumer price knowledge and gender has a positive effect on cherry picking in selecting groceries and whether there is a rela- tionship between consumer knowledge and gender. To achieve these objectives of the study the following hypo- theses were set: H1: Consumer price knowledge and gender has a positive effect on retail marketing strategy. H2: Consumer price knowledge and gender has a positive effect on cherry picking in selecting groceries. H3: There is a significant relationship between consumer knowledge and gender. LIMITATIONS OF THE STUDY Research was only conducted in shopping malls within the Pretoria (Tshwane) area, therefore this study is not truly representative of the South African population. No research was conducted over weekends and in the early evening; this could therefore have an impact on the final results of this study as some people conduct their shop- ping trips during this time. A larger percentage of females than males completed the questionnaire, and therefore this may have a bearing on the stronger results shown on females to that of males. LITERATURE REVIEW The literature explored in this section focuses on the effect of consumer price knowledge and gender on cherry picking in selecting groceries. The effect of consumer price knowledge and gender on retail marketing strategy Commodity prices in the market play a relevant role in consumer decision-making, as they influence what, when, where and how many consumers buy (Alba et al., 1999) and therefore studying consumers’ price aware- ness is highly relevant. Price awareness or price know- ledge means the ability of buyers to keep prices in mind (Aalto-Setala and Raijas, 2003). The majority of past studies on pricing have pointed out that consumers gene- rally have very limited knowledge of prices. Price know- ledge has therefore become the subject of increasing research interest. The consumers’ price knowledge and genders effect on consumers’ selection of grocery items can be influenced by numerous factors, which may be related to the characteristic of the consumer or the pro- duct category (Estelami, 1998). The demographic backgr- ound (example; age, gender and income) of a consumer may affect their interest in products as well as their exp- ertise as to their prices. It has been researched that fe- males, who account for the larger percentage of pur-cha- ses of grocery products, would be more knowledgeable about prices in this category than males (Market Res- earch Bureau. 2004). Estelami (1998) researched the influence of demographics on price knowledge in the gro- cery shopping industry and therefore the following hypo- thesis was set. H1: Consumer price knowledge and gender has a positive effect on retail marketing strategy. Venhuele and Dreze (2002) found that there are different

Available online at www.ignited.in Page 3

levels of price knowledge that a consumer can be found in. In the first level, there is no price knowledge, the second level reflects recognition of large price differences but this is still not perfect. The third level represents a consumers’ ability to recall a price within a 5% difference from the actual price set. The last level represents a con- sumer’s ability to accurately recognise the actual price of a product. This level is representative of the highest and rarest form of price recall. Venhuele and Dreze (2002) also deduced that cherry picking has no impact on price knowledge, due to their increased task complexity from the average shopper. The effect of consumer price knowledge and gender on cherry picking in selecting groceries There are many definitions and descriptions of cherry pic- kers that have been compiled by various researchers (Fox and Hoch, 2003; Gauri et al., 2005; Levy and Weitz, 2004), based on these definitions, cherry pickers can be defined as “…. purchasers who cherry pickers can be defined as “…. purchasers who examine the different proposals of several retailers and pick out the best over one or more days. They are characterised as price sensitive and well informed customers, as they construct pre-determined shopping trips from promotions and sales advertisements previously viewed so that the best deals are utilised”. The American Marketing Association (2004) defines cherry picking as “….. a buyer selection of only a few items from one’s line and others from another line, failing to purchase a complete line or classification of merchant- dise from one source”. Due to the shopping style of these customers, many affected retailers question their brand and store loyalty. Gauri et al., (2005), argue against the loyalty aspect of this definition as they found that cherry pickers can indeed be store loyal as they delay their shopping trip over time in order to get a better price deal at the same store. Secondary research done by the American Marketing Association (2004) shows that cherry pickers either keep a different reference price for each store they pick from or create an average reference price from several different sources. This may also lead to the lack of price know- ledge. We will investigate if this statement holds true for the South African industry, therefore the following hypo- thesis was set: H2: Consumer price knowledge and gender has a positive effect on cherry picking in selecting groceries. Although it is important that consumers are informed of the different prices offered at various places, it will benefit them even more if they have a general understanding of the retail industry as a whole. Findings from the research conducted by Fox and Hoch (2003) indicate that this mar- ket segment is sizable, heterogeneous, and potentially attractive for retailers, contrary to the myth that they are a retailers’ nemesis. The composition of the main decision- makers in a household and their different characteristics could determine cherry picking to a greater or lesser extent (Fox and Hoch. 2003). See Table 1 below for a better description. Adapted from: Fox and Hoch, 2003. Cherry Picking. Journal of Marketing. 69(1). [Online] Available from: http://proquest.umi.com [Accessed: 24/01/2006]. From the deductions made above in Table 1, one can conclude that cherry picking has a meaningful influence on the retail industry from an economic point of view, and therefore is a cause of concern for the affected retailers of today. A consumers understanding and intellect of the retail industry has a significant influence on their propen- sity to cherry pick. Consumer knowledge will therefore be discussed as the next important construct put under investigation in this study. Consumer knowledge and gender Consumer knowledge or expertise is generally defined as a consumers’ confidence or experience in shopping.

Available online at www.ignited.in Page 4

Knowledgeable consumers are those who are well infor- med or “clued up” on the prices of products, the types of stores as well as product assortment. These consumers generally feel comfortable in sharing this knowledge with others as they see themselves as a good source of ref- erence. Consumers inform themselves by searching for information on promotional material and constantly upda- ting themselves on the latest product on the market or price specials at certain stores. If a consumer is enligh- tened through various media channels and word of mouth, they begin to store this information in their mem- ory and begin to feel confident in their knowledge and therefore if information is required from them, they share it with the thought of being a good source of information. H3: There is a significant relationship between consumer knowledge and gender The method of analysis chosen and the results thereof will is discussed next. METHODOLOGY The sampling, data collections and measures of the research is analysed in this section. Sampling Grocery shoppers were the targeted population of this study. The sample was targeted through the use of mall intercept and inter- viewer-administrated personal interviews at a variety of shopping malls. The sampling frame was obtained from different shopping malls found in Pretoria (Tshwane), South Africa, based on con- venience. Shopping malls found in areas representing the different LSM groups were targeted, thus affording the researchers a closely representative sample of the population of Pretoria (Tshwane). A realised sample size of 176 was obtained from a target sample size of 250 with 100% of the questionnaires being usable. This could be attributed to the use of personal interviews as a data col- lection method. The data collection method is now discussed in more detail. Data collection

Available online at www.ignited.in Page 5

A pilot study was conducted on the questionnaire through 10 quasi interviews. Respondents were selected based on convenience and only the “main family grocery shopper” was allowed to participate. Data collection took place over a span of three days through the use of personal interviews at ten different shopping malls within the Pretoria (Tshwane) region. Well trained interviewees were used to conduct the research, thus decreasing the chance of error and bias. According to Tustin et al (2005) personal interviews are regarded as one of the most viable options to use in testing variables like cherry picking and consumer knowledge. Three different times slots in the day where used (morning, afternoon and early evening) where upon research was conducted, thus allowing the researches to capture a wider spread of respondents . Measures This study’s main constructs of consumer price knowledge, cherry picking and gender was measured through the use of Likert-type scales as opposed to the demographic variables (income, age, and gender) whose questions delivered only nominal data. The basic scale design therefore consisted of a Likert-type scale with five sca- le points (with labels ranging from strongly agree to strongly disag- ree and not well informed to very well informed). This scale was found to be highly reliable with a Cronbach’s Alpha of above 0.7. No items on any of these scales were reverse scored. The results of the study are shown below. RESEARCH RESULTS In this study the research results were described by using descriptive statistics and inferential statistics. Descriptive statistics The study shows that the majority of respondents who participated in this study were female (67%) with an ave- rage age of between 24 and 28 years (30%). A relatively diverse spread of language across respondents was obt- ained with most respondent’s preferred language being Afrikaans (50%) and 37% of the respondents English as their preferred language while only 13% speak North Sot- ho. The race of the respondents was an important varia- ble in indicating what effect price knowled-ge and gender has on a consumers’ propensity to cherry pick and the response is summarized in Figure 1. From the data represented above in Figure 1, the res- ponse with regards to the race of the respondents, it seems that 52% of the respondents were white and 45% were African, compared to 2 percent coloured and one percent Indian respondents. The outcome of this statistic can possibly be explained due to the selection of shop- ping centres during data collection. It can be clearly seen from Figure 2 that the majority of the respondents who completed the questionnaires whe- re females, showing a strong 67% compared to the 33% of male respondents. This can also be explained due to the time periods in which data collection took place. The bulk of the data collection took place in the morning, early afternoon and late afternoon, therefore the majority of the respondents were housewives and senior citizens with a

Available online at www.ignited.in Page 6

smaller percentage of the working population. The hypo- theses set for this study are stated in the next section from which the above was tested and analyzed. Inferential statistics In this study the researchers describe the sample data as means, standard deviation and proportions but also wish to make inferences about the population based on what was observed in the sample. Inferential statistics allow re- searchers to make inferences concerning the true differ- ences in the population (Tustin et al., 2005). The effect of consumer price knowledge and gender on retail marketing strategy The gender of consumers may have an influence on their interest in products and their expertise as to their prices which may affect the retail marketing strategy. It has been researched that females, who account for the larger percentage of purchases of grocery products, would be more knowledgeable about prices in this category than males (Market Research Bureau, 2004). This study would like to investigate if this statement holds true for grocery items purchased in South Africa. To achieve the object- tives of the study, to determine the price knowledge and gender relationship of consumers when they do grocery shopping, the following hypotheses were formulated: H01: µ1 µ2 HA1: µ1= µ2 In analysing H02, the researchers conducted a Pearson Correlation test between the variables; consumer price knowledge and gender. From the results indicated in Table 2, it shows that there is a significant relationship between the two as the p-value is 0.047 for both at a 0.05 significant level. When conducting the z-test, H02 was rejected therefore accepting Ha1. Therefore, by accep- ting Ha1, one may conclude that there is a significant cor- relation between price knowledge and gender. The table below portrays the results of a cross tabulation between the two constructs tested in this hypothesis. Table 3 shows that 53% of the female respon-dents are of the opinion that they are well informed about prices of grocery products compared to 24% of the male respond- ents. Table 3 also shows that 60% of the male respond- ents admit that they are not very well informed compared to only 30% of the female respondents. The study shows that females are more knowledgeable about prices of grocery products. The effect of consumer price knowledge and gender on cherry picking in selecting groceries The research aims to establish whether consumer price knowledge and gender has a positive effect on cherry picking in selecting groceries in South Africa and there- fore the following hypotheses were set: H02: µ1 µ2 HA2: µ1= µ2 Table 4 indicates the Pearson correlation on the effect of consumer price knowledge and gender on cherry pic- king in selecting groceries. These variables were correla- ted through the use of the Pearson Correlation test. The results show that there is a significant relationship bet- ween these variables with the p-value of 0.037 on a 0.05

Available online at www.ignited.in Page 7

significant level, therefore the null hypothesis is rejected as 0.037 is smaller than the p-value. The study shows that consumer price knowledge and gender has a posi- tive effect on cherry picking in selecting groceries. From the results found above it can be concluded that South African consumers are able to confidently cherry pick over more than one day due to their increased know- ledge of prices offered on different products at different stores. If consumers have a broader knowledge of prices they are able to participate in the act of cherry picking ea- sier than

stores and product assortment and gender Consumer knowledge as indicated in paragraph 5 is the consumers’ confidence or experience in shopping. Kn- owledgeable consumers are those who are well informed on the prices of products, type of stores as well as pro- duct assortment. The respondents were asked whether they know a lot about product prices, type of stores as well as product assortment. The response is summa- rized in Figure 3. From Figure 3 it is clear that female respondents are more knowledgeable about product prices, type of stores and product assortment. From the female respondents, 65% indicated that they are well informed, compared to 35% of male respondents. The research also aimed to establish whether gender has an influence on the knowledge that the South African consumers have on the prices of products, type of store and product assortment and therefore the following hypo- theses were set: H03: µ1 µ2 HA3: µ1= µ2 In Table 5, the variables were correlated through the use of the Pearson Correlation test. The results show that there is a significant relationship between these two va- riables with the p-value of 0.045 on a 0.05 significant level, thus the null hypothesis is rejected as 0.045 is smaller than the p-value. From the results found above it can be concluded that there is a significant relationship between consumer knowledge and gender and that gen- der has an influence on the knowledge that the South African consumers have on product prices, type of stores and product assortment.

MANAGERIAL IMPLICATIONS

Knowledge regarding cherry picking behaviour will enable retailers to get a higher wallet share from even its price sensitive shoppers, while at the same time charging hig- her prices for its price insensitive customers. The retailers must be aware of the fact that much of the savings on cherry picking trips is due to the purchase of more pro- motional items, where savings is subsidised by manufac- turer discounting. Thus, the burden of cherry picking is borne by both retailer and manufacturer. The implication of marketing for retailers is what they need to find a bal- ance between “specials” and cherry pickers as well as “regular” customers. This is important for the survival of the retailer over time. Retailers must also make an effort to embrace this seg- ment as it accounts for such a large percentage of the population. Cherry pickers build price competitions bet- ween retailers’, therefore they should strive to have the most attractive offers and weekly advertisements, in ord- er to draw the cherry pickers in and obtaining a greater turnover.

RECOMMENDATIONS FOR FUTURE RESEARCH

Research could be extended and conducted over week- ration the working population who only get the chance to conduct their shopping trips during these periods. A larger sample of South Africa needs to be considered in order to create a “truer” representation of the shopping habits of South Africans. A 50-50 sample population with regards to men and women should be attained in order to measure the true level of price knowledge and consumer knowledge.

REFERENCES

Aalto-Setala V, Raijas A (2003). Actual market prices and

12(3):180-192

Alba JW, Mela CF, Shimp TA, Urbany JE (1999). The effect of discount frequency and depth on consumer price judgements. J. Consumer Res. 26: 99 –114 American Marketing Association. 2004. Cherry picking. [Online] Available from: http://www.marketing power.com/mg- dictionary- view541. Blackwell RD, Miniard PW, Engel JF (2006). Consumer behaviour: Mason: Thomson South-Western. pp. 34-78 Brink A, Berndt A (2004).. Customer Relationship Management. South Africa:Juta. pp 25-62 Cant MC, Brink A, Brijball S (2006). Consumer behaviour. South Africa: Juta. . p. 65 Churchill GA, Iacobucci D (2002). Marketing research- Methodological Foundations:Orlando: Harcourt College Publishers. pp

234-238

Estelami H, (1998). The price is right… or is it? Demographic and category effects on consumer price knowledge. J. prod. brand manage. l 7 (3):254-266

69(1). [Online] Available from: http://proquest.umi.com Gauri DK, Sudhir K, Talukdar D (2005). “When” and “Where” to Cherry Pick? The Temporal and Spatial Dimensions of Price Search. [Online] Available from: www.google.com Levy M, Weitz BA (2004). Retailing Management. 5th edtion. New York: McGraw-Hill Irwin. pp. 142-149 Popkowski Leszczyc, PL Timmermans HJP (1997). Store switching behaviour. Marketing letter 8:2. Netherlands. Kluwer Academic Publishers. pp. 2-6.

II System. Simmons Inc. New York. P. 54 Vanhuele M, Dreze X (2002). Measuring the price knowledge shoppers bring to the store. J. mark. 66: pp 72- 85